Using Multiple Currencies for a RESP Account (Canadian)

[ThomasK]

Hi Mark, I hope you are well.

I'm having what I think are unexpected results toggling between CAD and USD via (a) Currency Settings/Default template and also (b) view data in default currency units. I'm thinking it is entirely on how I am using the "Specify Exchange Rate to Default" but could be on what Currency is set to default when I enter New Investments or view reports. It could also be the egregious FX charges above spot that is showing up.

Background:
I'm in Canada; I have all of my accounts (Margin, RRSP, TFSA) set up for both separate CAD and USD sub-accounts BUT my broker does not offer a USD sub-account for my daughter's RESP so I have to enter BOTH CAD and USD investments into the RESP portfolio which has a CAD Default Cash Account.

Questions:
1. When creating a New Investment, beyond selecting the correct currency with the pull-down, is it important as what Currency Default needs to be set?

2. When adding to positions Buys/Sells what is the correct use of the "Specify Exchange Rate to Default", i.e. when to check the box and when not to?

Thanks,
Thomas


Just to show, for setup, I've reviewed previous board posts, Help and the Tutorial. I've been observant of:
- maintaining the order of Currency 2, 3, 4, 5, etc between Currency Templates
- careful of using the Currency pull-down menu to select the ¢ or $ for New Investment
(note I use "Alt+0162" for the ¢ sign for CAD but use the keyboard "$" for USD
- double checked that all was correct...see image below

FM - Multiple Currencies Setup.png (131.2 KiB) Viewed 1221 times

[Mark]

Hi Thomas,

When creating a New Investment, beyond selecting the correct currency with the pull-down, is it important as what Currency Default needs to be set?

No, it doesn't matter. Just select whatever currency you want for that new investment. All prices/transactions should be entered in this currency you select (the native/assigned currency of that investment)

When adding to positions Buys/Sells what is the correct use of the "Specify Exchange Rate to Default", i.e. when to check the box and when not to?

If you want to specify an exchange rate that you received when buying/selling. For example, if you bought in CAD and your default cash is not CAD, you can specify the exchange rate between CAD and whatever your default cash is. For example, if your default cash is USD, and you bought something for 100 CAD, and paid for it with 95 USD, your exchange rate is 1 CAD = 0.95 USD.

[ThomasK]

Thanks Mark,

Okay, now I got it. I did have to play with it a bit (New Investment vs adding/subtracting from the investment vs double-clicking on the line item in Data Manager). Indeed, FM handles all the switching between multiple currencies (eg CAD - USD) seamlessly. My confusion was from two points: (a) the huge surcharge on FX by my broker and (b) my sloppiness creating the New Investment.

Just some thoughts for new users...

I made a few entry/setup mistakes so I recommend adding to the Help files a few pointers that might hit a new user buying CAD and USD in the same account so that some T's are crossed and I's dotted in their thinking:
- set up Multiple Currencies first
- double check that all settings are 100% via the Help files and Tutorial
- when setting up a New Investment always always always make sure you use the pull-down Currency menu
- know that all things are fixable via Properties or Data Register if something looks 'off' (most likely it's the investment's currency property)
- know that at least the Canadian brokers charge a huge premium on FX so taking the time to get the broker to open both CAD and USD accounts (I believe for Interactive Brokers users need to create the sub-accounts themselves)
- when adjusting a USD purchase in a CAD account you'll need to check the Exchange Rate to Default box and manually enter the calculated ratio as FX ratio will be different between the brokerage's value and the spot/system value
- there will be an immediate negative return due to the surcharge on the FX over spot prices and what FM will retrieve
- instead of manually inputting a calculated Exchange Rate, an investor could use FM's spot/system price for the Exchange Rate (ie don't specify an exchange rate) and instead adjust the Commission field to more accurately record the FX surcharge a Canadian (bank) brokerage charges above the spot/system price (so that you can reconcile the trade)


Thomas